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What is fiscal and monetary policy?

What is fiscal and monetary policy?

  • Fiscal policy is a government tool used to manage the economy through taxation, government spending, and other government activities.

  • Monetary policy is the use of a nation’s money supply and interest rates to influence economic activity.

  • An example of fiscal policy is taxation; the government can adjust the tax rates to influence consumer spending and economic growth.

  • An example of monetary policy is altering the interest rates; the government can raise or lower interest rates to increase or decrease the amount of money available for borrowing.

  • Another example of fiscal policy is government spending; the government can increase spending on projects such as infrastructure to stimulate the economy.

  • Another example of monetary policy is quantitative easing; the government can increase the money supply to increase the amount of money available for borrowing and investment.

  • Finally, an example of fiscal policy is debt management; the government can adjust its debt levels to influence the economy.

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